Published: 30 October 2026 · Last updated: 30 October 2026 · By Ameer Hamza
Payroll providers rarely quote one simple number. There is usually a base fee, a fee per employee, sometimes a fee per pay run, and extras for year-end forms or off-cycle payments. Unless you add them all up, two quotes that look similar can end up hundreds of dollars apart every year.
The short answer: as industry estimates, fully managed payroll outsourcing usually costs a base fee of about $40 to $150 a month plus about $6 to $15 per employee per month, with setup fees from $0 to $1,000 or more. A PEO usually charges 2% to 12% of gross payroll, and an employer of record about $199 to $699 per employee per month. Your real cost depends on headcount, pay frequency, locations and extras.
Anatomy of a Payroll Invoice
Here is an example monthly invoice for a business with 25 employees paid twice a month:
Line (example) | How it is charged | Amount |
|---|---|---|
Base fee | Flat monthly fee | $100 |
Per-employee fee | 25 employees × $10 | $250 |
Off-cycle run | One correction payment this month | $40 |
Monthly total | $390 | |
Year-end forms (once a year) | 25 forms × $5 | $125 |
In this example, payroll costs about $15.60 per employee in a month with an off-cycle run, and $14 in a normal month.
The 5 Pricing Models
Model | How it is priced (industry estimates) | Best for |
|---|---|---|
Payroll software (you run it) | About $20–$100 a month + $4–$12 per employee | Small teams with time to do it themselves |
Fully managed payroll | About $40–$150 a month + $6–$15 per employee | Businesses that want payroll off their desk |
Flat package | About $30–$400 a month up to a set headcount | Stable teams that don't change size often |
PEO (co-employment) | About 2–12% of gross payroll | Businesses that also want benefits and HR bundled |
Employer of record | About $199–$699 per employee per month | Hiring in a country where you have no company |
Estimated Monthly Cost by Team Size
For fully managed payroll in one location, using the industry ranges above:
Employees | Estimated monthly cost |
|---|---|
5 | $70–$225 |
25 | $190–$525 |
50 | $340–$900 |
100 | $640–$1,650 |
Each extra state, province or country usually adds filing work and cost.
Extras That Raise the Bill
Setup and data migration: moving year-to-date totals from your old system.
Per-run fees: some providers charge each time payroll runs, so weekly pay costs more than monthly.
Off-cycle payments: bonuses, corrections or final pay outside the normal cycle.
Year-end forms: W-2, 1099, T4 or P60 processing.
Extra locations: registration and filings in each new state or country.
Time tracking, benefits and HR add-ons.
What a Payroll Mistake Costs
Price is only half the story. Late or wrong payroll creates penalties that often cost more than a year of outsourcing:
Where | Example penalty |
|---|---|
USA | The IRS failure-to-deposit penalty is 2% of the unpaid deposit if 1 to 5 days late, 5% if 6 to 15 days late, and 10% after 15 days. It rises to 15% after certain IRS notices. |
UK | A late Full Payment Submission can bring a monthly penalty from £100 for 1 to 9 employees up to £400 for 250 or more. |
Remember that outsourcing the work does not move the legal responsibility. The IRS says the employer stays responsible for federal employment taxes even when a provider makes the payments, so choose a provider with clear checks and reports.
In-House vs Outsourced: The Hidden Line
Running payroll in-house is not free. Count the hours your team spends each pay run, software licences, training on rule changes and cover when that person is away. For many small and mid-sized businesses, that time alone costs more than an outsourced fee. For a full comparison, read outsourcing vs in-house hiring: the true cost.
7 Questions for Every Payroll Quote
What is the base fee, per-employee fee and per-run fee?
Is there a setup or migration fee?
What do off-cycle runs and year-end forms cost?
Which locations are included, and what does each extra one cost?
Who checks filings, and who pays if a provider error causes a penalty?
What reports do we get each pay period?
What is the notice period, and how do we get our data back?
Ready to switch? Follow our 30-day plan to outsource payroll.
Frequently Asked Questions
How much does payroll outsourcing cost per employee?
As an industry estimate, about $6 to $15 per employee per month for fully managed payroll, plus a base fee. Small teams pay more per head because the base fee is spread over fewer people.
Is it cheaper to outsource payroll than do it in-house?
Often, yes, for small and mid-sized businesses, once you count staff time, software, training and the cost of mistakes.
What is the difference between a payroll provider and a PEO?
A payroll provider runs payroll for you as the employer. A PEO becomes a co-employer and usually bundles payroll with benefits and HR, priced as a share of payroll.
Are there hidden fees in payroll outsourcing?
Common extras are setup, per-run fees, off-cycle payments, year-end forms and extra locations. Ask for all of them in writing.
Does outsourcing payroll remove my tax liability?
No. The employer stays responsible for payroll taxes and filings, so keep an approval step and check every report.
Sources and Further Reading
What happens if you do not report payroll information on time (GOV.UK)
Employers' Guide: Payroll Deductions and Remittances (Canada Revenue Agency)
Rules of reporting through STP (Australian Taxation Office)
This article is general information, not tax advice. Price ranges are industry estimates; the invoice is an example.
Get a Payroll Quote With Every Fee Listed
Vortexian Tech's payroll outsourcing service handles salaries, timesheets, leave and payslips for remote, contract and outsourced team members, with one monthly invoice. Need people as well as payroll? See employee outsourcing and HR compliance.
Send your headcount, pay frequency and locations to info@vortexiantech.com or request a payroll quote, and we'll send every fee in writing.
